Your clients have sold their house. Hooray.
The Agreement of Purchase and Sale has been signed and the deal is firm. Congratulations to you, the agent, and your buyer. It feels like time to celebrate, but then…
The date scheduled for the buyer to pay their deposit passes without the funds anywhere to be seen. Besides an angry seller who is likely riddled with emotions, what happens next?
What does the law say?
From a legal perspective, once both parties have signed the Agreement of Purchase and Sale, that contract is immediately binding.
The deposit is not part of the process to make the contract firm and binding, therefore, failure to provide a deposit is a fundamental breach of the agreement.
What are your clients entitled to?
When either party in the transaction defaults on the contract, the defaulting party is liable to the non-defaulting party for any damages incurred because of their default.
If their property goes back on the market, your client may be entitled to damages such as:
- The difference in purchase price between the breached Agreement of Purchase and Sale and a subsequent Agreement of Purchase and Sale.
- Carrying costs of the property for any period beyond the closing date of the breached Agreement of Purchase and Sale.
- Any other cost that would not have been incurred had the breached Agreement of Purchase and Sale been honoured (i.e. staging costs, legal fee, costs associated with a purchase dependent on the breached sale, etc.).
How can an agent best help their client through this situation?
As soon as you realize the buyer has failed to produce the deposit, you should request confirmation from the buyer’s agent about the buyer’s position. Next, your real estate lawyer will help guide you through this scenario. Contact the lawyer who will be assisting with the transaction and advise that the deposit has not been provided and the buyer’s position.
In the worst-case scenario, the buyer will not provide the deposit and they are non-responsive.
The seller should have their lawyer write a letter noting the buyer is in default, and that if they do not respond by a certain time, the seller will be re-listing the property and seeking damages (if any) upon the subsequent sale.
The best-case scenario is that the buyer provides the deposit, both parties accept the late deposit, and the transaction continues as normal.
McMurter & Associates has you covered.
McMurter & Associates has been providing real estate legal services for over 30 years in the Durham Region. We strive to provide you with straightforward and useful advice that you can use in your business. If you have found this useful, please share this information with your colleagues, or better yet, invite them to sign up for the newsletter!
If you have any questions about your real estate transaction, we are available Monday to Friday, 9am until 5pm.
Email: info@mcmurter Phone: 905-666-9200